Lululemon Stock Drops Over 10% as Inflation and U.S. Sales Weigh on Outlook
Lululemon shares plunged more than 10% in after-hours trading, transforming from a $341.53 close to a brutal $307 nosedive. The athleisure giant’s stock was already suffering, down 8.27% year to date and 12.31% over the past year. If today’s after-hours bloodbath holds, it’ll mark the company’s largest single-day drop in a year. Not exactly the zen vibes they’re selling in those overpriced yoga pants.
The irony? Lululemon actually beat expectations for its fourth quarter. Revenue jumped 13% to $3.61 billion, surpassing the $3.57 billion forecast. Earnings per share hit $6.14, handily beating the $5.85 analysts expected. Their full-year revenue reached a whopping $10.59 billion, up 10% from 2023. Sounds great, right? Wrong.
Investors are fleeing because of weak forward guidance. The company projected Q1 2025 revenue between $2.34-$2.36 billion, falling short of Wall Street’s $2.39 billion expectation. Full-year revenue guidance of $11.15-$11.30 billion also disappointed analysts who wanted $11.31 billion. Earnings projections came in equally disappointing, with Q1 EPS guidance of $2.53-$2.58 (below $2.72 expectations) and full-year EPS of $14.95-$15.15 (under $15.31 forecasts).
The culprit? America. While international markets are thriving with 38% growth and China surging 39% despite its economic woes, U.S. sales have flatlined. Comparable sales in the Americas were completely stagnant in Q4. Zero growth. Zilch. Blame inflation, cautious consumers, or the fact that people are questioning spending $128 on leggings during economic uncertainty.
Lululemon isn’t sitting still. They’re expanding into golf, tennis, and running gear while planning 10% square footage growth for 2025. The company still aims to double sales to $12.5 billion by 2026. Bold move when your core market is stalling.
Wall Street remains cautiously optimistic. Among 22 analysts, Lululemon maintains a Moderate Buy rating with an average price target of $420.68, suggesting potential 23.18% upside. Some firms are wildly bullish (Oppenheimer’s $500 target) while others remain skeptical (Jefferies’ $220 forecast). CEO Calvin McDonald has confirmed that lower traffic at stores is directly resulting from decreased consumer spending due to economic concerns. Despite these challenges, the company reported an impressive operating margin of 28.9% for Q4 2024, demonstrating efficient cost management amid sales pressures. The geographic divide is stark as fourth quarter international sales rose 22% year-over-year while Americas business remained flat. The company reported cash on hand of $2 billion while continuing to expand with 18 new stores opened during the quarter. Rising manufacturing costs could further pressure margins as the company faces supply chain challenges from production facilities across Asia.
Meanwhile, Jim Cramer isn’t buying the company’s optimism. Neither are after-hours traders, apparently. For a brand selling premium athleticwear, Lululemon’s stock performance is looking decidedly flabby.
